Options Trade – Apple Inc. (NASDAQ:AAPL) Calls Monday, July 21, 2014

**OPTIONS TRADE: Buy the AAPL Jan 2015 100.000 call (AAPL150117C00100000) at or under $4.00, good for the day. Place a protective stop limit at $1.60 and a pre-determined sell at $8.00.

by Ian Harvey

July 21, 2014

Introduction

Apple Inc. (NASDAQ:AAPL), which designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications, has had a good run in 2014 despite iPhone sales slowing, the company’s stock is already 16% up for the year and it is one of the reasons to be bullish on its prospects. Apple Inc. (NASDAQ:AAPL)’s future remains stronger especially after the signing of a partnership agreement with International Business Machines Corp (NYSE:IBM) for the distribution of iPhone’s right into Enterprise worldwide.

When Apple reports earnings on Tuesday, analysts will almost undoubtedly be focused on metrics like iPhone and iPad sales, total revenue, and EPS. But let's not forget to check in on one of the most impressive numbers Apple reports every quarter: its cash. Apple's healthy cash, along with its seemingly never-ending stream of more green, is what makes Apple an excellent stock.

At $150.6 billion in Apple's second fiscal quarter, the company's cash hoard is no joke. In fact, it's the largest known pile of cash held by any corporation in the world. What's even crazier is that the source of Apple's cash -- earnings -- doesn't look poised to decline in the near future at all.

New categories, a rumored iPhone 6 with lineup with larger displays, no sign of waning pricing power, and gross profit margins that seem to have stabilized at abnormally high levels, should help Apple continue to rake in lots of cash in the coming years.

Earnings

Apple last announced its earnings results on Wednesday, April 23rd. The company reported $11.62 EPS for the quarter, beating the Thomson Reuters consensus estimate of $10.13 by $1.49. The company had revenue of $45.65 billion for the quarter, compared to the consensus estimate of $43.55 billion.

During the same quarter in the prior year, the company posted $10.09 earnings per share. The company’s quarterly revenue was up 4.7% on a year-over-year basis. On average, analysts predict that Apple will post $6.32 earnings per share for the current fiscal year.

Apple's Next Smart Device

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year.

Analysts Opinions

Apple (NASDAQ:AAPL)‘s stock had its “neutral” rating reiterated by Zacks in a research report issued to clients and investors on Friday. They currently have a $98.00 target price on the stock. Zacks‘s price objective points to a potential upside of 3.78% from the stock’s previous close.

Zacks’ analyst wrote, “Apple reported impressive second-quarter 2014 results on the back of strong iPhone sales. Apple’s third-quarter guidance was also positive. The upcoming iPhone 6 will drive the top line in 2015. The company is also expected to announce iWatch by October, which will be a game changer, in our view. Apple’s growing market share in the BRIC and emerging markets is a major positive. Although iPad reported a dismal quarter, its growing adoption in enterprises and education sector is a significant growth catalyst. Moreover, the availability of Microsoft Office on iPad will further boost sales. The partnership with China Mobile will continue to boost iPhone sales in China. The recent partnership with IBM will improve Apple’s position in the enterprise market. Apple continues to face significant competition from Asian handset makers such as Samsung and Lenovo’s acquisition of Motorola will further intensify competition. This will further hurt its ASP, in turn negatively affecting gross margin. We, therefore, maintain our Neutral recommendation on the stock and set a price target of $98.00.”

The company has been the subject of a number of other research reports:-

• Analysts at Goldman Sachs raised their price target on shares of Apple to $107.00 in a research note on Wednesday.

• Separately, analysts at Citigroup Inc. initiated coverage on shares of Apple in a research note on Wednesday. They set a “buy” rating and a $110.00 price target on the stock.

• Finally, analysts at Susquehanna raised their price target on shares of Apple from $104.00 to $115.00 in a research note on Tuesday, July 15th. They now have a “positive” rating on the stock.

Two equities research analysts have rated the stock with a sell rating, eleven have given a hold rating and thirty-one have issued a buy rating to the company’s stock. The company presently has an average rating of “Buy” and a consensus target price of $99.27.

Conclusion

Apple is incredibly profitable. Over 21% of Apple's sales end up on its bottom line. And considering Apple is bringing in $176 billion in sales a year, a bottom line with this sort of profitability is a lot of money -- more money than Apple could ever spend on its business or growth opportunities.

As this company makes the best possible products and is one of the most pro shareholders management team in the market place, and the company just announced an amazing deal with IBM, it is in all likely-hood to give a profitable options trade.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the AAPL Jan 2015 100.000 call (AAPL150117C00100000) at or under $4.00, good for the day. Place a protective stop limit at $1.60 and a pre-determined sell at $8.00.

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